Shell Energy snaps up utility business

Shell Energy intends to broaden its portfolio offerings through the acquisition of utility MP2 Energy.

Shell Energy North America, a division of the oil and gas giant Royal Dutch Shell, has signed a purchase agreement for the acquisition of Texas-based MP2 Energy. The agreement reflects Shell’s growing interest in the power sector, specifically in renewable energy and energy management services.

MP2 Energy’s impressive portfolio

MP2 Energy manages 1.7GW of power, including 30MW of landfill gas, 30MW of large-scale solar and 550MW of wind, as well as 70MW of natural-gas-fired plants. The utility also has 40MW of distributed solar which is as a result of a SolarCity partnership created in 2015. In addition to this, the company boasts a 550MW demand response portfolio.

MP2 is also a retail energy provider for commercial and industrial customers in Texas, Illinois, Ohio and Pennsylvania. Through self-developed proprietary systems and technology, MP2 is able to help customers manage and reduce their energy consumption through efficiency measures and distributed generation. In doing this, the utility helps customers avoid fluctuating retail power prices.

Agreement to improve growth for both companies

If the regulator approves the agreement, MP2 can grow its renewables portfolio and further innovate around its product offerings.

Shell Energy North America (SENA) and its subsidiaries currently trade and market natural gas and wholesale power, as well as environmental and risk management products. SENA’s retail energy business targets large commercial and industrial customers on the West Coast of the US. The acquisition will help SENA to build on these capabilities and grow market share in the large C&I customer segment across.

"As Shell continues to expand its energy focus, we will strive to bring customers ever more innovative commodity solutions, including the deployment of new energy management tools," said Glenn Wright, vice president of SENA, in a statement.

Diversifying portfolios

The acquisition reflects a growing interest amongst oil companies in the renewable and sustainable energy space. With wind and solar prices becoming more competitive than oil and gas, oil companies are looking to diversify their portfolios.

Total of France spent nearly €1bn on buying 100-year-old battery manufacturer Saft. Chairman and chief executive Patrick Pouyanné said the deal would “allow us to complement our portfolio with electricity storage solutions, a key component of the future growth of renewable energy”.Pouyanné said in a statement that electricity would be “the energy of the 21st century” and that he wanted his company to take advantage of the entire electricity value chain, including batteries, solar power and biogas generation. Total announced last year that it was spending €200m on transforming an unprofitable oil refinery into a biofuel plant, and separately that it would start to invest $500m a year in renewables.Total made its first real drive into renewable energy five years ago, with its $1.4bn acquisition of SunPower, one of the largest solar panel makers in the US. Total has also since set up a division, called New Energies, for these low-carbon technologies.

Royal Dutch Shell has an internal team focusing on solar development alone. Shell will also be looking into opportunities offered by energy storage and grid management. 

Shell Technology Ventures co-led a $14m investment in Sense Labs in 2016 and led a funding round in Geli last year worth $7m. Shell’s venture arm also participated in a funding round for Aquion Energy in late 2014.

The acquisition will see MP2 managed by the existing MP2 management team as a wholly owned subsidiary of SENA. The deal is expected to close in the third quarter of 2017.